Short Sale Terms to Ease

As the number of homes entering foreclosure in Pasadena continues to increase, homeowners are looking for some relief in the process known as a short sale. A short sale occurs when the proceeds of the house are not enough to pay off the existing mortgage balance. This process allows the homeowner to sell the property as usual, however it is sold with a contingency that the final approval must come form the bank.

Ask most real estate agents their opinion on short sales and you’re likely to receive a negative response. The reason …… a short sale usually consumes a lot of time and resources and there is no guarantee that the bank will approve the sale. The other reason that you are not likely to hear….the agent does not have the training or information involved on how to successfully complete a short sale.

Short sales can be encumbered by two loans on the property, usually a first and second and many times these are with two different lenders. If the loans are with the same company, there is an excellent chance that department within the same bank do not talk to each other. The negotiation and follow up skills of the real estate professional are critical.

Short Sale Submission Packet

Lenders are being inundated with reams of paper and short sale proposals, however there is certain documentation they require and they usually require it correct the first time or you may find your proposal back at the bottom of an ever growing pile.

Before an offer is received, lenders typically want to see 2 years of tax returns, two recent months of bank statements, recent pay stubs, a personal financial worksheet, a hardship letter explaining why you cannot make your house payment and the listing agreement. If your self employed they will want a profit & loss statement.

Once an offer is received, they require a HUD – 1, showing all of the costs as well as the final proceeds, the buyers pre-approval letter and proof of funds. I usually go a bit further and provide an explanation showing how many properties in the area are in foreclosure including a market analysis and also the complete listing detail of the property so that they can see how long it has been on the market and the price it was offered, as well as price reductions that were taken.

New Timelines Announced

As mentioned above, the time involved in a short sale can be extreme. However, it looks like all of that is about to change. new short sale guidelines announced by the Treasury Department are going to dramatically reduce the amount of time involved in the bank approval process. Previously decision times could come anywhere from 60 days to 6 months, however under the new guidelines banks will be required to inform the parties involved in 10 days. This is major legislation. I believe it will have much more impact than any of the previously designed assistance geared towards helping homeowners in distress and the less than favorable results that have been achieved.